The Ugly, Costly, and Deadly Consequences of no Pipelines

There’s an overlooked statistic energy watchers like to keep an eye on throughout the year. It doesn’t always get a lot of press or attention, but it’s one that always tells an important story. I’m talking about how much oil we ship south via rail. It’s a small fraction of what we move through pipelines – usually between 3 and 5 per cent of total product shipped – but the trends are what matter.

There are range of factors that contribute to this number, including price differentials and other commodity markets, but this number has been on a steady climb for most of 2017.

Canadian crude oil shipments to the United States topped 137,000 barrels a day in October, a six-month high, and up from only 92,000 a day in July. In May, it was an 18-month high of 155,000 barrels. Bloomberg reports that number could shoot up to 400,000 in the early part of 2018.

In early December, Plains Midstream announced it had reopened its mothballed train-loading terminal in Saskatchewan and a group of investors and First Nations is expected to announce financing for an Alberta-to-Alaska oil rail line early in 2018. This comes at the same time as news that Canadian railroad operators can’t keep up with the growing demand for their capacity.

So, why is it happening, and what does it all mean?

It’s pretty simple, actually. Producers are scrambling to load their wares on any rail car they can find because our pipeline network is chock full – and with the future of major pipeline projects very much up in the air, industry is starting to respond. Enbridge has reported that it’s planning for its system to be at or near capacity until 2021.

With current pipelines jammed and proposed pipelines stalled, more and more crude will find its way onto trains that travel through populated areas and environmentally sensitive ecosystems. This should concern everybody who cares about the safe transportation of oil.

We all remember the 2013 Lac-Megantic disaster, when a 74-car freight train carrying Bakken formation crude derailed in the Quebec town, killing 47 people and destroying half of the downtown. Other recent derailments, in New Brunswick and Ontario, ignited fires and caused other environmental damages on First Nations land.

Each one was a tragic reminder that rail oil spills are larger, more frequent, and cause substantially more damage to property and human life than pipeline leaks. Oil shipped through pipelines produce between 61 and 75 per cent less greenhouse gas emissions than oil on a train, and also costs between $5 and $10 less per barrel to move.

We will continue to monitor the oil-by-rail numbers, but the trends are fairly obvious and, therefore, worrisome. However, on the bright side, they make the case for more pipelines even stronger.